In its 1957 to 1960 taxation years, the taxpayer carried on exploration work on properties in which it had a direct interest. However, its chief task was the development and management of properties owned by other companies in which it usually had a share interest. It generally subscribed for shares in a corporation owning prospects and by contract with the corporation controlled the expenditure of the invested money on exploration.
After noting that s. 83A(3) referred to a company whose "principal business is mining or exploring for minerals" without requiring "that such mining or exploring for minerals should be done within Canada or should be done upon properties in which the taxpayer seeking the deduction has an interest in the property" (p. 5286), Spence, J. went on to find that the taxpayer was engaged in mining and exploring for minerals and that this was its principal business. In response to a submission of the Minister referring to the large investment portfolio held by the taxpayer, he stated (p. 5286):
It may be said generally that although the source of the income of a corporation is an important element to be considered in determining which is its principal business it is not the only matter to be considered and not necessarily the determinant factor.
He quoted with approval the statement made in the Tax Appeal Board that:
[I\t would appear to be reasonable to assume that the multiplicity of arrangements which exist between mining companies and the constant juggling of shareholdings for various necessary purposes is just part and parcel of the mining business. ... Obviously, the financing function of a mining company is an integral part of its business.